European Stocks Rise for Third Day in Four Before Debt Summit

Oct. 26 (Bloomberg) -- European stocks advanced as the
region’s leaders gathered in Brussels for the second summit in
four days to address the debt crisis and after U.S. durable-goods orders and home sales topped forecasts.

Merck KGaA jumped the most in more than two years as the
drugmaker posted profit that beat analysts’ estimates. Pandora
A/S soared 12 percent amid speculation the Danish jeweler won’t
lower its earnings outlook this close to reporting results.
Nyrstar NV slid 8.5 percent as the world’s biggest producer of
refined zinc cut its mine-output forecast.

The benchmark Stoxx Europe 600 Index increased 0.2 percent
to 240.8 at the close of trading, having swung between gains and
losses at least 20 times. The measure has rallied 12 percent
from this year’s low on Sept. 22 amid speculation policy makers
will reach agreement on a solution to the region’s debt woes.

“There is scope for great disappointment” from the summit,
Gary Jenkins, head of fixed income at Evolution Securities in
London, said in a report. “Though, if there seems to be general
agreement on the bigger scheme and a tight timeframe for the
details to be worked out, markets may give them the benefit of
the doubt.”

European leaders are meeting in Brussels for the 14th
crisis summit in 21 months to discuss Greece’s second bailout,
the recapitalization of banks and strengthening the 440 billion-euro ($612 billion) rescue fund into a more potent weapon.

Expanded Bailout Fund

German lawmakers backed increasing the bailout fund’s
capacity today, removing one hurdle in the path of a regional
agreement. EU leaders may ask national finance ministers to
determine the firepower of the expanded European Financial
Stability Facility by the end of November, an EU official said.

The Stoxx 600 pared an earlier gain of 1.2 percent today as
an official said EU talks with banks on bondholder losses as
part of a second Greek rescue package are deadlocked and have
been suspended. While policy makers and bankers are converging
on a 50 percent writedown for Greece’s lenders, the disagreement
centered how much of the risk of newly issued Greek bonds should
be insured, the EU official said on condition of anonymity
because the talks are private.

“Markets know what may come from Brussels tonight will not
be a full and final solution,” said Thomas Haerter, chief
strategist at Swisscanto Asset Management AG in Zurich, who
helps oversee about $67 billion. “The problem will only
ultimately be solved when debt ratios are much lower in the
problem countries than they are today.”

National Indexes

The Stoxx 600 is trading at 10.4 times the estimated
earnings of its companies, compared with the two-year low of 9.1
reached on Sept. 23, according to data compiled by Bloomberg. Of
the 75 companies in the Stoxx 600 that have released earnings
since Oct. 11, 30 missed analyst profit estimates, Bloomberg
data show.

In the U.S., orders for durable goods excluding
transportation equipment rose in September by the most in six
months, showing manufacturing is supporting the expansion.
Purchases of new houses gained more than forecast as discounted
prices lured buyers in some parts of the country.

Merck Gains

Merck KGaA advanced 8.5 percent to 65.07 euros, the biggest
gain since January 2009. The German maker of cancer drug Erbitux
reported third-quarter profit that beat analysts’ estimates
because of growth at the Merck Serono pharmaceutical and
Millipore equipment businesses.

“There is an element of relief as markets feared another
downgrade,” said Jens Houe Thomsen, an analyst at Silkeborg,
Denmark-based Jyske Bank A/S. “We’re one month into the final
quarter of the year and if they were to deliver another
substantial downgrade it would have arrived by now.”

About 8.6 percent of Pandora shares are on loan, an
indication of short-sellers’ interest, according to research
firm Data Explorers.

Telenor ASA climbed 5.3 percent to 97.40 kroner as the
largest phone company in the Nordic region boosted its outlook
for full-year sales and profitability after third-quarter
earnings increased.

Nyrstar Slides

Nyrstar declined 8.5 percent to 6.14 euros in Brussels, the
biggest drop in two months. The zinc producer lowered its
forecast for output from mines because of lower-than-expected
deliveries from Talvivaara Mining Co.’s Finnish site, where it
has an offtake agreement.

Adidas AG, the world’s second-biggest sporting goods maker,
slid 3 percent to 49.68 euros as Morgan Stanley cut its
recommendation on the shares to “equal weight” from
“overweight.” The brokerage said the company faces an increase
in costs as it expands, while a slowdown in China is a
“potential risk” to momentum.

Areva SA declined 3.2 percent 21.38 euros as the world’s
largest builder of atomic plants said its FBFC International
subsidiary may progressively close its nuclear fuel fabrication
site in Dessel, Belgium, citing overcapacities on western
European markets.